From the Editor
Pro Farmer Editor Brian Grete takes time to talk with Pro Farmer Members about some of the key issues in each week's Pro Farmer newsletter.
From the Editor for Sept. 16
Sep 16, 2011
From The Editor
September 16, 2011
Hello Pro Farmer Members!
One of my favorite stories of the week in this week's letter was a late addition... it's the last item on the front page.
It talks about when China has bought U.S. corn this year. It's really very simple, when Chinese importers can get U.S. corn into their country at a lower cost than buying domestic corn, they've imported (at least this year). There are three periods this year that U.S. "landing prices" in China have dipped below Chinese prices this year, and China bought corn each time. At least it's suspected China bought corn... some of the large sales are for delivery to "unknown destinations."
This week, U.S. corn landing prices are below Chinese corn prices. U.S. and Chinese corn prices were "trading together" until just recently. Then when USDA delivered what really was a bullish Supply & Demand Report and prices slumped, Chinese corn prices didn't follow the U.S. down. That's made U.S. corn competitive in China again. If importers there hold true to the pattern they've shown so far this year, China should be buying corn very soon (if they haven't already bought corn).
And I'm serious... the corn S&D Report really was a bullish report. The crop was cut 417 million bu. from August and USDA had to cut 400 million bu. from demand to hold carryover "up" at 672 million bushels. But, USDA's report included anticipation of higher corn prices to destroy the demand USDA says eventually will be destroyed.
If those higher prices don't materialize, we assume USDA will build some of the demand back into the corn spreadsheet, driving 2011-12 carryover down.
But just how much further will USDA be willing to drop carryover? Last year, when demand was hitting on "all 8," USDA left the 2010-11 corn carryover estimate at 675 million bu. in two consecutive months, but that's as low as it got. After that, higher prices started to dig into demand, driving carryover up to the current estimate of 920 million bushels. Based on that experience, we do not expect USDA to lower corn carryover in upcoming S&D Reports. If the corn crop gets smaller, look for USDA to anticipate even higher prices and even lower demand to hold carryover close to 675 million bushels.
That's it for this week...
Have a great weekend!!